Joseph buys what was represented to be a new computer from Buy-It-Now Electronics. Joseph issues a check to Buy-It-Now Electronics for $3500 drawn on Manchester United Bank. Joseph is the drawer of the check.

Buy-It-Now Electronics negotiated Joseph's check to Tina's business, Dark Raven Hardware, in payment for hardware Buy-It-Now Electronics had purchased from Tina's business in order to recondition the computers that he sold.

Tina as the sole proprietor of Dark Raven Hardware had no knowledge of Joseph Smith or if Joseph had any personal defenses to liability to the check he wrote to Buy-It-Now Electronics. Tina was a holder that took the instrument for value, in good faith, and met the requirements of being a holder in due course.

In the meantime, Joseph discovered that what he paid $3500 for was really a reconditioned laptop worth only $350. He called his bank, Manchester United Bank, and put a stop payment order on the check.

When Tina took the check to Manchester United Bank to cash the check and put the funds into the Dark Raven Hardware business' checking account, Manchester United Bank refused to pay the check based on Joseph's stop payment order.

As a result, Tina sued Joseph on his drawer's liability.

HISTORY: The trial court ruled in favor of Joseph based on his personal defense of misrepresentation by Buy-It-Now Electronics of the prior use of the computer as a reason for not paying Tina.

Tina appealed the ruling of the trial court on behalf of Dark Raven Hardware.

*Holder in Due Course and Drawer's Liability

Assuming that Buy-It-Now Electronics did not negotiate the check to Tina (Dark Raven Electronics) and instead took the check to Manchester United to cash. Manchester Bank United honored Joseph's stop payment order. Buy-It-Now Electronics sues Joseph on his check for failure to pay for the computer.

ISSUE 2: Would Joseph have a valid defense that he could assert against Buy-It-Now Electronics?

RULE:

ANALYSIS:

CONCLUSION: